The European Union has announced significant rollbacks to key sustainability regulations, cutting environmental reporting requirements for thousands of businesses and largely exempting supply chains from due diligence obligations. These changes represent a stark shift in the EU’s once-pioneering green agenda, raising concerns about the future of corporate accountability in industries like fashion.
A Step Back in Sustainability Regulations
The proposed changes primarily affect two landmark pieces of legislation: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The CSRD, which mandates companies to disclose extensive data on their environmental and social impacts, is set to undergo a drastic reduction in scope. Under the proposed reforms, reporting obligations would be reduced by 70%, and only companies with over 1,000 employees and turnover exceeding €50 million ($52 million) would need to comply. This would effectively remove around 80% of companies from the regulation’s jurisdiction, particularly benefiting mid-sized and smaller businesses.
Similarly, the CSDDD, originally designed to hold brands accountable for human rights violations and environmental degradation within their supply chains, is being significantly watered down. Its implementation is now delayed until 2028, penalties for non-compliance have been reduced, and due diligence requirements will apply only to direct contractors rather than the entire supply chain. This marks a substantial retreat from efforts to ensure corporate responsibility in global supply networks.
The Political and Economic Context
This shift aligns with growing pressure within Europe to prioritize economic competitiveness over climate initiatives. A recent European Commission report highlighted concerns that European businesses are struggling under a heavy regulatory burden, making it difficult to compete with economies like the United States, which have pursued deregulation under policies such as President Trump’s “regulatory bonfire.”
While EU officials insist that their commitment to sustainability remains strong, these reforms reflect a broader pivot towards policies that favor business interests over stringent environmental oversight. The move has drawn sharp criticism from advocacy groups, investors, and sustainability experts, who warn that it could derail progress on climate action and corporate responsibility.
Implications for Consumers
For consumers, these regulatory changes could lead to reduced access to information regarding the environmental and social impacts of fashion products. With fewer companies mandated to disclose their sustainability practices, consumers may find it more challenging to make informed purchasing decisions aligned with their ethical values. This diminished transparency might also increase the risk of greenwashing, where brands make unfounded claims about their environmental efforts to appeal to environmentally conscious buyers.
Furthermore, less oversight could lead to continued exploitation of cheap labor and unsustainable production methods, as fashion brands may face less pressure to improve working conditions or reduce pollution. This could make it more difficult for consumers to trust sustainability claims and hold brands accountable.
Brand Positioning and Strategic Responses
Fashion brands now face a pivotal moment in determining their market positioning. While the regulatory easing offers an opportunity to reduce compliance costs, it also places greater responsibility on brands to self-regulate and maintain robust sustainability initiatives. Brands that continue to invest in transparent and ethical practices may differentiate themselves by appealing to the growing segment of consumers who prioritize sustainability. Conversely, brands that scale back their sustainability efforts risk damaging their reputation and losing consumer trust.
“This is deregulation, plain and simple,” says Natalia Yerashevich, head of transparency and supply chain at Ohana, a consultancy specializing in EU sustainability strategies. “The most severe adverse impacts occur beyond tier one, and failing to monitor these areas increases risk.”
Experts fear that by reducing transparency requirements, brands will face less pressure from investors and consumers to maintain high sustainability standards. While some companies have already invested in robust traceability and reporting systems, the shift away from mandatory compliance may lead to inconsistencies in reporting and accountability.
“In the long run, this could allow the industry to operate without immediate consequences, prolonging unethical labor practices and environmental damage,” warns Muchaneta ten Napel, founder of fashion policy consultancy Shape Innovate.
What’s Next?
The proposed reforms will now move to the European Parliament and the Council for review and potential amendments. The negotiation process could result in further revisions before the changes are finalized. However, if the reforms pass in their current form, they will reshape the regulatory landscape, reducing the EU’s influence as a global leader in corporate sustainability governance.
While some businesses welcome the reduced compliance burden, the rollback raises broader questions about the EU’s long-term commitment to addressing environmental and human rights challenges within industries like fashion. Without strong regulatory oversight, voluntary sustainability initiatives may struggle to fill the gap, potentially weakening global efforts to create a more responsible and transparent supply chain.
As the debate continues, stakeholders across the industry and beyond will be closely watching how these changes unfold and what they mean for the future of corporate sustainability in Europe.
